Archive for the 'Big Public Pension Club' Tag Under 'OC Watchdog' Category

On Tuesday, a coalition of California mayors – including Santa Ana’s Miguel Pulido (right) and Anaheim’s Tom Tait (below) – filed a proposed constitutional amendment with the state attorney general which would do the unthinkable: allow California governments to lower pension formulas going forward for public workers.

It would not – we repeat, would not – take away benefits public workers have already earned. And it would let each little city and county work out the devilish details for itself – no dictates from on high.

It’s the sort of forward-fix that Democratic Mayor Chuck Reed (of the almost-bankrupt city of San Jose) and the non-partisan Little Hoover Commission have argued is essential if core public services for Joe Citizen, and pensions themselves for public workers, are to survive.

“Many of California’s public employee retirement plans are simply unsustainable and it’s in everyone’s interest to provide the tools to fix the problem now…” Reed said in a prepared statement. “(W)e believe employees would much rather adjust their future expectations than risk seeing their accrued benefits slashed in bankruptcy. We’ve already seen that tragic situation play out in cities like Stockton and Central Falls, RI. Our teachers, police officers, firefighters and other dedicated public servants deserve to know that the pensions they’ve earned will be there when they need it – not just the day they retire, but also when they’re 85 or 90.”

It has, for many years, been a thin wire under the fingernails of The Working Man: Joe Public Employee types forced to pay their own share of pension costs, while their much higher-paid bosses got a free ride.

That's because it rolls back benefits for new workers, but does nothing to change the generous promises made to the hundreds of thousands of current and retired public employees already in the system. A minor step forward, a warm-up, the first mile of a marathon, critics called it, because it does little to address the state's current unfunded pension liabilities, which have been pegged at $240 billion to $500 billion by various analysts.

Before there was Bell and Robert Rizzo, there was Vernon and Bruce Malkenhorst.

The city of Vernon is small. But for a long time, pay there was big. So big, in fact, that Malkenhorst – a Huntington Beach resident – was earning $529,536 as Vernon's city manager, finance director, redevelopment director, city clerk, city treasurer, and head of the municipal light and power operation – all pretty much at the same time.

So when Malkenhorst (pictured at right, in 1977) retired in 2005, he was soon pulling down a pension in excess of $500,000 from the California Public Employees Retirement System. Which made him the top-paid public pensioner in the entire Golden State. And, perhaps, anywhere.

The checks continued even after he pleaded guilty in 2011 to misappropriating $60,000 in public funds and using it for political contributions and personal expenses like golf games, massages, a personal trainer and a home security system. (No biggie there: We know that felons can continue to collect their public pensions; former O.C. Sheriff Mike Carona gets about $218K a year even in prison, and convicted former Treasurer/Tax Collector Robert Citron was getting about $150,000 a year when he recently passed away).

But a half-million dollars a year, for life, for the head of a tiny city with only 113 residents? That struck even CalPERS as a bit odd. Six or so years later than it should have, perhaps, but one might say better late than never.

Where once they felt pride, Orange County Fire Authority firefighters are now filled with frustration and a lack of faith in their agency, according to a confidential internal survey of 259 union members that was obtained by the Watchdog.

The anonymous survey, completed in December by the Orange County Professional Firefighters Association, decried management for lying to the media in an attempt to spin out of embarassing controversies and likened the firefighting agency to "Titanic."

"I have witnessed behavior from our management at HQ that would get one fired, sued or arrested in the civilian/corporate world," said one respondent. "We have turned from a premier fire department to one that has non-firefighter leadership and less ability to think and act like firefighters."

Another firefighter said many of his colleagues have given up in frustration.

Though CalPERS released earnings for the 2012 calendar year, the system actually uses the fiscal year ending June 30 to calculate investment returns and how much taxpayers must contribute to cover public employees' retirement costs. In the fiscal year ending June 30, 2012, the system earned 0.14 percent on its investments, far short of the 7.5 percent CalPERS assumed it would gain.

But in the first six months of the current fiscal year, things were looking up.

Driven largely by strong returns on global stocks and real assets, the pension fund gained 7.1 percent between June 30 and Dec. 31, 2012, officials said. The earnings brought the fund's total value to about $250 billion from about $237 billion on June 30, 2012.

But while earnings rebounded in the first half of the fiscal year, they were still a little short of the 7.5 percent return CalPERS assumes for the entire fiscal year.

The giant investment fund that feeds the state's public employee retirement system contributed far less than expected to the pension kitty last year, fueling a long-standing debate over how much the system can — or should — rely on investments to cover retirement costs in the long haul.

The California Public Employees' Retirement System, or CalPERS, expects a 7.5 percent annualized rate of return on its more than $200 billion in investments. The expectation was revised downward last year from 7.75 percent, which was CalPERS' expectation for more than a decade.

But in the fiscal year ending June 30, 2012, the system got just a 0.14-percent net return on its billions in investments, according to CalPERS' Comprehensive Annual Financial Report for the 2011-12 fiscal year. The fund ended the fiscal year with $237 billion, down from $241 billion at the end of the previous fiscal year.

Public equities lost about 7 percent, but other investments, including real estate, performed well enough to keep the system's entire portfolio out of the red — barely, the report said.

While CalPERS lost on its public equities investments, U.S. domestic markets gained in the year ending June 30, 2012. The S&P 500 gained 1.68 percent, the Dow Jones Industrial Average gained 2.36 percent, and Nasdaq gained 4.23 percent, according to market data available online.

In a move praised by pension reformers, the $9.7 billion Orange County Employees Retirement System has lowered the projection for its annual investment returns from 7.75 percent to 7.25 percent.

Reducing that assumption means that Orange County will have to pay millions of dollars in extra pension contributions starting July 2014, to help make up for the lowered investment rate. John Moorlach, chairman of the Board of Supervisors, estimated that the change would cost the county an additional $60 million a year. The county is the largest participant in the 37,693-member retirement system.

Besides increasing the yearly fee, the reduction in the investment assumption also boosts the county's unfunded liability – that is, the pension debt – to $6 billion, said Moorlach.

Despite the increased costs, Moorlach praised the 5-4 vote last week by the county retirement system board to lower the investment assumption. Four of the "yes" votes came from directors appointed by the Board of Supervisors.

David Rudat, the retired Orange city manager and former fire chief, violated California retirement law by working the last 15 months as interim fire chief for the bankrupt city of Stockton, CalPERS officials say in a public document obtained by The Watchdog.

Rudat has resigned from the Stockton job, effective Aug. 8, rather than pay back the $216,000 in pension benefits he collected at the same time he was earning $119 an hour from the fire chief's position, pension officials said. His resignation comes two days before a deadline imposed by CalPERS.

Rudat said he did not intend to violate any retirement laws, which he described as being mostly in the gray.

In a July 18 letter -- (David Rudat City of Stockton) -- California Public Employees Retirement System analyst Liz Burke told Rudat that his effort to cloak himself as an independent contractor for the city was contradicted by the details of his job.

Burke wrote that Rudat wore a city uniform, drove a city vehicle and used stationary emblazoned with the city's identification, showing he represented a government agency. Rudat was told by the city when he was to work and how he was to work. And Rudat was paid through the city payroll system, the letter said.

California's public retirement agency plans to radically slash the pension of ex-Vernon City Manager Bruce MalkenhorstSr. -- dropping him from a state high of more than $540,000 a year to $115,848.

The retirement system dubbed Malkenhorst's pension illegally inflated and said it would attempt to recover overpayments during the three-year statute of limitations.

Malkenhorst, who lives in Huntington Beach, told the Watchdog on Friday that he will hire an attorney and explore fighting for his half-million dollar a year pension.

"This is clearly a case of elder abuse," said Malkenhorst, 77. "I'm from an era where you made as much as you could for as long as you could."

The California Public Employees Retirement System this week announced its plans to reduce Malkenhorst's pension and deny six other Vernon officials all or part of their memberships in the retirement system. The action followed an audit of Vernon's salary history and pension formulas. It is the largest reduction in CalPERS history.

When David Noyes retired as general manager of Serrano Water District in late 2010, he dove right into his new job -- as acting general manager of Serrano Water District. His consulting contract was effective the same day as his retirement.

Noyes didn't even have to clean out his desk. And now he was collecting a yearly pension of $150,680 to go with his annual consultant's salary of $121,920 to work part-time running the district and Irvine Lake, where water is stored.

According to the district, he earns $43,920 a year for working 360 hours at Serrano Water District and $78,000 a year for working 1,080 hours at Irvine Lake, a separate entity managed by Serrano.

Noyes doesn't consider himself a double-dipper or someone gaming the system. At a time when high pension costs are endangering state and municipal budgets, the California Public Employees Retirement System, or CalPERS, is not so sure. The agency is looking into Noyes' retirement.

The regulations are a little complicated. One set of rules says that retirees in the CalPERS system can work as high-level interim consultants for another agency in CalPERS , but only for 12 months. Extensions can be granted. Noyes is in the middle of his second year as a consultant for Serrano.